I am as opposed to corporate welfare as I am personal welfare. Yes, there needs to be some safeguard in place for when disasters happen, as we saw with Katrina and many other natural disasters. But in most instances that safety net should come in the form of proper insurance, people taking responsibility for themselves. We need to help those incapable of helping themselves, something the government is stupendously unsuccessful at accomplishing and a task that private charities do quite expertly.
The bail out plan runs contrary to everything capitalism is about. It will introduce unrescedented government intrusion into private business and equally unprescendented levels of national debt. The government has no money to provide companies with bailouts... it is you and I, the taxpayer ponying up for this.
However, since Washington never backs away from an opportunity to grow exponentially, and the crop currently there has a particular affinity for federalism. So lets try to mitigate their plans, since the DC juggernaut cannot be stopped.
First, it is not a bail out. It is not a gift. The amount determined to be necessary to steady the economy must be repaid. To that end the companies that accept help will be getting it in exchange for shares of stock or bonds. That is called investing.
The government should re-examine the SEC and FEC rules on the books and determine which ones are necessary for a free market economy and which ones hamper growth and act accordingly. The government should also establish an agency that will govern the shares held by the government. While the Senate will have oversight responsibility over the agency it will act independently, much as the Post Office does. Much, if not all of the current problem is not caused by a lack of government oversight, but rather by too much dischordant government interference.
These loans will have a 10 year term. Companies that participate will be obligated to buy back at least 10% of the outstanding shares every year. Stock will be repurchased at current market value, but never less than the amount paid by the agency when the loan was issued. Companies may purchase more than 10% of the outstanding debt but if they are incapable of purchasing at least that much the agency can auction off the difference. Even if a company is current in it’s repayment, after 5 years the agency can review bids to purchase the government’s portfolio of stocks, again with the stipulation that any transaction be at or above the price the agency paid.
The agency will not name members to the board of directors of the companies involved. They are to remain independent of corporate management. However, if the agency feels the company's board of directors is not acting with the best interest of the stock holders in mind they can ask the company to buy its stock back within 90 days and cancel participation in the program.
Keep in mind the companies standing to benefit from this bailout are listed prominently in the Forbes 50. The average profit margin earned by the insurance companies, banks and investment houses in 2007 was in the range of 18 to 20 percent, double that of the oil industry.
For the American taxpayer, many of who live paycheck to paycheck, with a substantial number who live paycheck to almost the next paycheck, cannot be expected to bail out corporations without reaping some of the profits. So I also propose that the agency direct any “profits” derived for the sale of shares of stock, and any dividends, be dedicated for solely one purpose, paying down the deficit (by repurchasing their shares or bonds).
It should not be used to fund more government programs; it should not be used to expand the scope of government. The sole purpose should go to deficit relief.
And speaking of not expanding government, the agency should be established with a clear sunset date. It needs a defined purpose and should have a predetermined date of termination. Since the program I propose will run for 10 years the agency should have one more year to complete all sales of stock and compete all other business transactions. Then run an additional year to complete all record keeping functions and prepare a report on the success or failure of the agency and the bailout project.
And speaking of reports… one condition of acceptance of the federal money means all companies involved must submit 100% to an investigation into the real reasons behind the collapse and what went wrong. Congress must establish a non-partisan investigation to determine what mix of government policies and corporate practices led to the crisis. Was it a mix of greed and incompetence, or some sort of misfeasance or malfeasance on the part of both parties?
You see it is not merely good enough to put a bandaid on the problem. The circumstances that led to it must be investigated so they can be avoided in the future.
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